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Lobbying can have a slightly different meaning depending on where in the world you are based. In the United States, lobbying is a term that is used to describe activities that are paid whereby special interest groups hire professional advocates who are well-connected to argue for certain legislation. Often, the professional advocates will be lawyers. They will argue that legislation should be put in place by the likes of the United States Congress and other decision-making bodies. With that being said, in this blog post, we will tell you a bit more about lobbying, including whether or not it is tax-exempt through the IRS.

Some lobbying is allowed, but if you overstep the mark, you could end up losing your tax-exempt status

Let’s begin by giving you a better understanding of lobbying and the stance that the IRS has concerning this. Generally speaking, no business or organization can qualify for section 501(c)(3) status should a significant part of its activities involve lobbying, i.e. incorporate attempting to influence legislation. A 501(c)(3) organization does have the option of engaging in some lobbying. However, if you engage in too much lobbying, there is the risk that you could end up losing your tax-exempt status.

What does legislation refer to?

So, to understand whether or not you’re taking lobbying too far, you first need to understand what counts as legislation. The legislation incorporates action by Congress, as well as any local council, state legislature, or legislature from a similar governing body. This is for resolutions, bills, acts, or similar items, for example, legislative confirmation of appointive office. It also includes those carried out by the public in a constitutional amendment, ballot initiative, or referendum, or any other procedure that is like these. However, it does not incorporate actions by administrative, judicial, or executive bodies. 

A business or organization will be deemed to be attempting to influence legislation if it urges the public to contact employees or members of a legislative body for the aim of opposing, supporting, or proposing legislation. The same goes if the organization decides to contact members of a legislative body or employees directly for the same purpose. Another example is if the organization advocates for the rejection or the adoption of legislation. 

Organizations can get involved in public policy issues without it being deemed lobbying

While organizations should not get involved in lobbying, this does not mean that they cannot get involved in issues concerning public policy. Businesses and organizations do have the ability to get involved in public policy issues without it being viewed as lobbying. A good example of this is when organizations hold meetings of an educational nature, distribute and prepare educational materials, or do any sort of other activities that involve public policy in an educational manner that will not end up harming their status as being tax-exempt. 

How to know whether lobbying is “substantial” at your organization?

As mentioned earlier, for you to lose your tax-exempt status, lobbying would need to be considered a substantial part of your organization. So, how is this determined?

Whether or not an organization’s efforts to have an impact on legislation are deemed a significant part of their overall activities is figured out based on all of the pertinent circumstances and facts of every case. Many different factors are considered by the IRS, including the time that both volunteer and compensated workers devote to the activities of lobbying, as well as the expenditures devoted by the company to the activity in question. All of this will be considered to determine whether or not the lobbying is substantial. 

Under the test that is carried out to figure out whether lobbying is substantial, an organization that carries out lobbying of an excessive amount in any taxable activity may end up losing its tax-exempt status, which can result in all of the income is subject to tax. Furthermore, section 501(c)(3) organizations that end up losing their tax-exempt status because of excessive lobbying, other than private foundations and churches, are subject to an excise tax, which equates to five percent of their lobbying costs for the year in which they no longer can enjoy tax-exemption.

In addition to this, a tax that equates to five percent of the lobbying costs for the annum may be imposed against any of the managers at the organization, severally and jointly, who have agreed to make such costs knowing that the expenditures would have a very probable chance in resulting in the organization losing its tax-exempt status. A different number of taxes are applied to lobbying expenditures when it comes to private foundations, so do keep this in mind.

Seek expert assistance if you’re unsure about the position of your organization

If you are unsure as to whether your lobbying activities count as substantial or not, the best thing to do is get in touch with a team of legal experts who can help you to navigate the situation. They will be able to give their expert opinion on whether your current activities are risky to your overall tax-exempt status. If so, they will advise you on the steps to take next. 

You need to choose legal experts with care. Make sure that they have plenty of experience in the industry and that they have worked on many different cases like this before so that they are best placed to provide you with the advice that you need.

Contact David Goldwater Consulting 
If you’re seeking help with determining your tax-exempt status, we hope this article provided you with insight into lobbying and whether or not this is tax-exempt through the IRS. We hope that this has helped you to get a better understanding, showcasing what is and is not allowed. For further assistance, the best thing to do is get in touch with legal experts at David Goldwater Consulting based in Nevada who can answer your queries, help you to understand your position, and provide reliable assistance. Do not hesitate to consult the best Nevada lobbyist for help.

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